Dubai's financial services watchdog will liberalise its regulations on the funds industry and lower its fees next year in an attempt to boost investor activity and competition, a panel said on Monday.
The Dubai Financial Services Authority (DFSA), which regulates financial and ancillary services on the Dubai International Financial Centre (DIFC), could implement the changes as early as the first quarter of 2010, the panel's chair said.
Nick Smith told Reuters Television the new regime could lead to a significant inflow of funds to the DIFC. Compared to overseas markets, the DIFC has a low level of fund activity with nine fund operators, four private funds and one public fund. Adding to its woes, foreign fund managers have criticised the funds regime in Dubai as too restrictive and expensive.
"The proposed changes ... would permit DIFC-based fund managers to locate funds outside of the DIFC, as well as (allowing) international fund managers to locate funds within the DIFC - neither of which is currently permitted - provided those foreign locations are reputable well-regulated jurisdictions," Smith said.
The panel also recommended that the DFSA create a special funds regime for high net worth, sophisticated investors with a fast-track registration process.
LOWERING FEES
High fees relating to initial and on-going licensing, compliance and documentation costs have scared investors away in the past and limited fund activity. "Across all the jurisdictions which the panel has looked at, the DIFC and DFSA costs are the highest," the report said. "The panel recommends that the DFSA reduces its fees and charges to bring them in line with those applied in comparable jurisdictions."
The DFSA could not provide current fee figures for funds operating in the DIFC. Dennis van Leeuwen, Managing Director of the DIFC-regulated Superfund, said the high operating costs discouraged the setting up of new offices, limited company size and encouraged outsourcing. "If they lower costs, it will lower the entry barrier to start up a fund and will attract more fund providers to Dubai which could lead to enhanced competition," he said.
Van Leeuwen said regulation changes would mainly attract Cayman Islands-registered funds which are currently not permitted to be registered in Dubai. The DFSA, which set up the 10-member panel last July, regulates a total of 324 entities, including 246 firms, 59 ancillary service providers, 17 auditors and two stock markets.